In June 2016, Volkswagen agreed to a $14.7 billion settlement in a case against the German car company for cheating on emissions tests. Since then the company has worked on fixing the cars that were found to have components that limited the emissions from the cars during the testing phase, but released up to 40 times the allowable amount when they were driven on the road by consumers.
When you take into account the number of vehicles VW sells to consumers, that’s a lot of emissions poured into our air.
About $10 billion of the settlement was set aside for the owners of the affected vehicles, which tallied up to around 487,000 cars. The company has until May 2018 to make this happen.
Each owner will decide if they want to repair it or have Volkswagen buy it back from them. If the company has to repair the vehicles, it could cost anywhere from $12,500 to $44,000 to fix each one. For a company known for its innovation in diesel vehicles, the lawsuit was a huge blow to VW.
This brings us to the new issue. How can they come back from such a disaster?
How to NOT gain back loyalty
Upon the announcement of the findings of wrongdoing on the part of Volkswagen, the company’s CEO Mark Winterkorn resigned from his position. “I am doing this in the interests of the company even though I am not aware of any wrongdoing on my part,” Winterkorn said after meeting with Volkswagen directors in September 2015.
His separation from the company, and subsequent finger-pointing led to VW entering a bit of a tailspin, even after the new CEO Matthias Müller was appointed.
The problem with Müller was that he wasn’t very knowledgeable about Volkswagen, as he came from the company’s high-end luxury brand Porsche. As head of Porsche, Müller was able to rake in record-setting revenues in the mere five years in his position. Unfortunately, this didn’t transfer well over to VW.
While still trying to clean up the mess over one year into his new position, Müller inadvertently attacked the company’s consumer base and placed Americans as a higher priority over Europeans; he said these things during an interview with a German newspaper FAZ.When asked why American consumers were receiving a larger payout while Europeans were left in the dark, Müller replied:
“That’s not a one size fits all situation, there is a totally different basis. Customers in Europe are not disadvantaged, neither in terms of mileage nor in drivability. And if I may say so: On one hand, many criticize American legal system in other contexts, see TTIP. When it comes to gaining a personal advantage, suddenly American law seems to be the right way.” Hmmm… ‘the right way’ doesn’t sound so great for Europeans.
As if that wasn’t bad enough, Müller followed it up by saying it was the Europeans fault that VW had not jumped on the electric car train alongside almost every other manufacturer. When confronted with a question about the lack of VW’s interest in electric vehicles, he said, “There is no supply shortage, there is a demand shortage. On one hand, many Germans think and act green, but when it comes to electric mobility, they wrinkle their noses. I have a hard time understanding this phenomenon.”
Since his controversial interview, Müller has laid pretty low and worked with the other VW executives on plans for bringing the company back into the limelight – which is probably more his comfort zone.
What happens to Volkswagen now?
The Environmental Protection Agency (EPA) and California Resources Brand have both given Volkswagen approval to begin selling vehicles from model-year 2015 once again. This was the last year diesel models were approved by U.S. regulators. If the company takes the approval and runs with it, which it more than likely will, it will help VW get rid of the surplus of vehicles left in storage after the 2015 fiasco. As far as the company’s diesel future in the U.S.? Well that’s another story.
According to Hinrich Woebcken, CEO of Volkswagen Group of America, the company will no longer be offering diesel vehicles to American consumers (Who got the better end of the deal now, Europe?). In a statement at the Las Angeles Auto Show, Woebcken said he didn’t feel diesel would ever “come back in the same magnitude as we’ve seen it up to now.”
His news was followed up by Audi of America President Scott Keogh, who took the opportunity to plug his company’s plans for the future. He said to Reuters in a statement, “Once we hopefully get past everything, I see an opportunity for potentially, probably to offer [diesel] on one model, and that model would probably be the Q7 SUV.”
So it’s not diesel altogether like Woebcken suggested. If manufacturers like Audi are planning to offer at least one diesel model, then why can’t VW? Perhaps the emissions scandal, and the criticism consumers received from executives, was too much for the company to bounce back. Time will tell when it comes to Volkswagen’s future, but it will be interesting to see how they survive without diesel.